STEPHAN, J.
This is a negligence action against The Harry A. Koch Co. (Koch), an insurance broker. Countryside Cooperative (Countryside) and Michigan Millers Mutual Insurance Company (Michigan Millers) allege that they sustained damages when Koch failed to timely report a personal injury claim against Countryside to the company that insured Countryside under a claims-made policy. Koch appeals from a judgment in favor of Countryside and Michigan Millers, and Countryside and Michigan Millers cross-appeal. We affirm the judgment of the district court.
In late October 2004, William Boden was working on his property in rural Lancaster County. A tank owned by Countryside and filled with anhydrous ammonia was mounted on a trailer and parked on land adjacent to the property where Boden was working. Boden subsequently sued Countryside, alleging that the tank leaked and that he suffered extensive physical injuries as a result of his exposure to the anhydrous ammonia.
At the time of this incident, Countryside, formerly known as Firth Cooperative Co., Inc., was insured under two liability insurance policies: a commercial general liability policy issued by Michigan Millers and a commercial pollution legal liability policy issued by American International Specialty Lines Insurance Company (American International). The American International policy was a claims-made policy, and Koch was the broker for Countryside on the policy. Countryside timely notified Koch of the Boden claim, but Koch did not notify American International until several days after the reporting period in the American International policy had expired. Michigan Millers was timely notified of the Boden claim.
American International subsequently refused to defend Countryside against Boden's claim on grounds that (1) Boden's claim was not reported within the time periods specified in the policy, (2) Countryside was not an insured under the policy, (3) an underground tank exclusion in the policy applied, and (4) a "known contamination" exclusion in the policy applied. Michigan Millers defended Countryside under its policy and eventually settled Boden's claim for $900,000.
After the settlement with Boden was concluded, Countryside and Michigan Millers entered into a "Memorandum of Understanding" in which they agreed to jointly sue Koch based upon Koch's alleged negligence in failing to timely report the Boden claim to American International. Michigan Millers agreed to control the litigation and pay all attorney fees and costs, and Countryside agreed to cooperate fully in the prosecution of the action and execute any necessary documents. It was also agreed that Countryside would receive 2 percent of the net proceeds of a judgment or settlement and that Michigan Millers would receive the remaining 98 percent.
Countryside and Michigan Millers filed this action against Koch on December 12, 2006, alleging that Koch's negligence in failing to timely report the Boden claim to American International resulted in damages because Countryside lost the benefit of the American International policy. After Koch answered, both parties filed motions for summary judgment on the issue
The parties subsequently filed renewed motions for summary judgment. After reviewing the previously submitted evidence and receiving one additional exhibit, the district court determined (1) that no genuine issues of material fact existed, (2) that Countryside was a named insured under the American International policy, (3) that none of the policy exclusions applied, (4) that Countryside's right to coverage under the American International policy "was lost due to Koch's failure to notify [American International] within the policy period or extended reporting period," and (5) that American International would have been obligated to defend Countryside on the Boden claim if proper notice had been given by Koch. The court reiterated its previous determinations regarding the standing of Countryside and Michigan Millers to maintain the action.
The parties then waived a jury trial and submitted the issue of damages to the court on a stipulation of facts. The court determined that both the Michigan Millers and the American International policies included "other insurance" clauses which provided that if each policy was primary, then the loss would be shared equally up to the policy limits. The court held that both policies were primary, and therefore awarded Countryside and Michigan Millers one-half of the $900,000 settlement amount, one-half of the $37,445.49 incurred by Michigan Millers defending the Boden claim, and attorney fees incurred by Countryside in the amount of $9,514.39, for a total judgment against Koch of $478,237.14. After Koch's motion for new trial or to reconsider was overruled, it filed this timely appeal. We granted a petition to bypass filed by Countryside and Michigan Millers.
Koch assigns that the district court erred in entering judgment for Countryside and Michigan Millers, because (1) there was no valid assignment of rights from Countryside to Michigan Millers, (2) Koch did not owe any duty to Michigan Millers, (3) Countryside did not sustain a loss, (4) the American International policy was a windfall policy to Michigan Millers and therefore Michigan Millers had no right to assert coverage or receive the benefit of the American International policy, and (5) Michigan Millers failed to pursue American International's denial of the Boden claim.
On cross-appeal, Countryside and Michigan Millers assign that the district court erred in failing to award as damages the full amount of the Boden settlement and in failing to award prejudgment interest.
Whether a party who commences an action has standing and is therefore the
The interpretation of an insurance policy is a question of law.
An appellate court will affirm a lower court's granting of summary judgment if the pleadings and admissible evidence offered at the hearing show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.
For various reasons, Koch contends that neither Countryside nor Michigan Millers possessed rights or interests which would entitle either of them to recover damages in this case. We generally interpret these arguments to assert that neither Countryside nor Michigan Millers is a real party in interest in this case.
Neb.Rev.Stat. § 25-301 (Reissue 2008) provides that "[e]very action shall be prosecuted in the name of the real party in interest ...." The purpose of the statute is to prevent the prosecution of actions by persons who have no right, title, or interest in the cause.
It is uncontroverted that Koch acted as a broker with respect to the American International policy issued to Countryside. An insurance broker acts as an agent of the insured.
The district court rejected Koch's argument that Countryside had suffered no loss by relying upon the collateral source rule. Under the collateral source rule, the fact that the party seeking recovery has been wholly or partially indemnified for a loss by insurance or otherwise cannot be set up by the wrongdoer in mitigation of damages.
Here, Countryside alleged that because of Koch's negligence, it lost coverage for the Boden claim which would otherwise have been provided under the American International policy, for which Countryside paid a premium. The provision of coverage under the Michigan Millers policy, for which Countryside also paid a premium, is a collateral source with respect to Countryside's negligence claim against Koch. Koch, as the alleged tort-feasor, cannot escape liability to Countryside on the basis of the benefits paid under the Michigan Millers policy.
We also note that the complaint included a claim for defense costs incurred by Countryside on the Boden claim which were not paid by Michigan Millers, and these costs were included in the final judgment for damages. Although Koch argues in its brief that these costs should not have been included in the award of damages, Koch makes no corresponding assignment of error. We therefore do not address this issue further because of the established principle that errors argued but not assigned will not be considered on appeal.
We conclude from the record that Countryside had rights and interests which could be benefited by the relief sought in this action and was therefore a real party in interest.
Koch argues that Michigan Millers cannot be a real party in interest "because there is no privity of contract between Koch and Michigan Millers, nor did Koch owe any legal duty to Michigan Millers."
Michigan Millers also has standing because of its subrogation right arising from its payment of the Boden claim. In Midwest PMS v. Olsen,
In the context of insurance, the right to subrogation is based on two premises: (1) A wrongdoer should reimburse an insurer for payments that the insurer has made to its insured, and (2) an insured should not be allowed to recover twice from the insured's insurer and the tort-feasor.
In this case, it is claimed that but for Koch's negligence, the American International policy would have provided liability coverage to Countryside for the Boden claim. Had that occurred, Michigan Millers' liability to Countryside on the Boden claim would have been diminished by operation of the "other insurance" clause in the Michigan Millers policy. Therefore, to the extent that Michigan Millers paid more to Countryside on the Boden claim than it would have been required to pay if both policies had been in force, it is subrogated to Countryside's claim against Koch for negligently failing to report the Boden
Koch argues that the claims of Countryside and Michigan Millers must fail because there has never been a judicial determination that the American International policy would have applied to the Boden claim but for Koch's failure to timely report the claim. We address each of Koch's arguments in turn.
Koch argues that the late report was only one of four reasons given by American International for denying coverage on the Boden claim and that Countryside and Michigan Millers did not establish that the other three reasons given by American International were invalid. We find no merit to this argument.
The American International policy provided coverage for "[b]odily [i]njury" resulting from "[p]ollution [c]onditions." The policy defined "pollution conditions" as "the discharge, dispersal, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant." The plain language of the policy therefore clearly covered Boden's claim that he was physically injured by exposure to anhydrous ammonia leaking from a tank owned by Countryside.
The first alternative reason which American International gave for denying coverage was that Countryside was not an insured under its policy. The record shows that the policy was originally issued to "Firth Cooperative Co., Inc." as the named insured. But after Firth Cooperative Co. changed its name to "Countryside Cooperative," an endorsement was added to the policy effective December 1, 2003, identifying the named insured as "Countryside Cooperative." We find nothing in the record to contradict this evidence. Thus, the record establishes as a matter of law that Countryside was the named insured under the American International policy.
The second alternative reason given by American International for denying coverage was an exclusion for claims arising from "Pollution Conditions resulting from an Underground Storage Tank" located on Countryside's property. But Countryside's president averred that the Boden claim "was based upon alleged release of anhydrous ammonia from a portable tank mounted upon a trailer; it did not in any way involve underground storage tanks." His deposition testimony further substantiated this fact. And in responses to requests for admissions, Koch admitted that the Boden claim "involved an allegation of ammonia escaping from an above ground tank." We find no evidence in the record from which a reasonable inference could be drawn that the Boden claim involved an underground storage tank. The record thus establishes as a matter of law that this exclusion did not apply.
The third alternative reason given by American International for denying coverage was an exclusion applicable to claims arising from a "known contamination" on
The American International policy obligated it to pay, on behalf of Countryside, claims for bodily injury, property damage, or cleanup costs resulting from pollution conditions commencing after December 13, 2002, "provided such Claims are first made against the Insured and reported to the Company, in writing, during the Policy Period, or during the Extended Reporting Period if applicable." The policy period ended on December 13, 2004, and there was an automatic extended reporting period of 60 days. The extended reporting period therefore expired on February 11, 2005. There is undisputed evidence that a representative of Countryside reported the Boden claim to Koch on November 17, 2004, and requested that it be submitted to American International. There is also undisputed evidence that despite assuring Countryside that Koch would timely report the claim to American International, Koch did not do so until February 14, 2005. In denying coverage for the Boden claim, American International cited the fact that this report was not received within the time periods required under its claims-made policy. Koch argues that the district court erred in concluding as a matter of law that American International was entitled to deny coverage on this basis, because there was no showing that American International was prejudiced by the delay.
We have held that failure to give timely notice of a claim to an insurer is not a defense to the claim unless there is evidence of collusion or it is shown that the insurer has been prejudiced in its handling of the claim.
Koch relies on Rentmeester v. Wis. Lawyers Mut. Ins.
Under a claims-made policy, "the very description of the risk covered include[s] the requirement that claims be both made and reported within the policy period."
We agree with the reasoning of these cases and hold that where an insurance policy requires that a claim be made and reported during the policy period or an extended reporting period in order for the loss to be treated as falling within the coverage of the policy, failure to comply with the reporting requirement is sufficient to defeat coverage without a showing of prejudice to the insurer in the absence of a specific policy provision to the contrary. The district court did not err in concluding as a matter of law that Koch's failure to timely report the Boden claim was the sole reason that the claim was not covered under the American International policy.
Koch makes a general exhaustion of remedies argument, contending
Koch also argues that the claim asserted by Countryside and Michigan Millers in this action is barred by the doctrines of laches and equitable estoppel. In Nebraska, both laches and equitable estoppel are affirmative defenses.
Koch makes a rather confusing argument that because Michigan Millers was aware of the American International policy but did not pursue a subrogation claim against American International, it should be barred from recovery against Koch. We find no merit in this argument. Neither Countryside nor Michigan Millers could have recovered from American International, because coverage under its policy was negated by the failure of Koch to report the Boden claim in the time periods required by the policy. Having paid amounts which should have been paid by American International but for Koch's negligence, Michigan Millers was entitled to assert its subrogation claim in this action, as explained more fully above.
For the reasons discussed, we find no merit in any of Koch's assignments of error.
In their complaint, Countryside and Michigan Millers sought the full amount of the Boden settlement and related defense costs paid by Michigan Millers as damages in their claim against Koch. In their cross-appeal, they argue that the district court erred in awarding only 50 percent of this amount.
Some additional background on this issue is necessary. Both the Michigan Millers policy and the American International policy contain similar "other insurance" clauses. The clause in Michigan Millers' policy provided that the insurance was primary, except in limited circumstances not applicable to this case. It further provided that if another applicable policy was also primary, it would contribute by equal shares. The clause in American International's policy also provided that the insurance was primary, and that if another policy was also primary, it would contribute by equal shares.
In its order awarding damages, the district court noted the similarity of the "other insurance" clauses of both policies, and determined that both policies were primary, thus obligating each insurer for an equal amount of the claim. The court concluded: "While the `total policy insuring intent' theory advocated by [Countryside and Michigan Millers], which has been applied by the Minnesota courts, has some logic, this court will defer to the appellate courts of this state if such a theory is to be adopted here."
The "total policy insuring intent rule" originated in a circumstance where two insurance policies applicable to a claim contained conflicting "other insurance" clauses.
While they do not contend that the "other insurance" clauses found in the Michigan Millers and American International policies are in conflict, Countryside and Michigan Millers argue that this should not preclude application of the "total policy insuring intent rule" under more recent cases which arguably apply the rule in the
Koch argues that in the absence of conflicting "other insurance" clauses, Michigan Millers would have been responsible for 50 percent of the Boden claim under the principle, well established in our jurisprudence, that where the terms of an insurance policy are clear, they are to be accorded their plain and ordinary meaning.
Countryside and Michigan Millers also contend in their cross-appeal that the district court erred in not awarding prejudgment interest. Prejudgment interest may be awarded only as provided in Neb.Rev.Stat. § 45-103.02 (Reissue 2004),
Prejudgment interest under § 45-103.02 is recoverable only when the claim is liquidated, that is, when there is no reasonable controversy as to either the plaintiff's right to recover or the amount of such recovery.
For the reasons discussed, we affirm the judgment of the district court.
AFFIRMED.
WRIGHT, J., not participating.
